The revenues for quarter one have been in line with guidance, says Abid Ali Z Neemuchwala, CEO, Wipro. In an interview to ET Now, Neemuchwala states that the energy and utility verticals of his firm continue to have strong headwinds. Edited excerpts:

ET Now: Tell us about the revenue in quarter one.

Abid Ali Z Neemuchwala: Our revenues in quarter one have been in line with our guidance. While we do not give the breakup of organic or inorganic growth, as you look at Wipro’s business mix, there are a couple of headwinds that play out in the situation which we are working on; making sure that we overcome them and have all our cylinders wired for higher growth on an average. But the two things that I would like to highlight is the energy and utility vertical continues to be having strong headwinds.

ET Now: But the fifth or the sixth quarter in a row right?

Abid Ali Z Neemuchwala: Yes, and then the technology part of our manufacturing and technology vertical is also a little soft. On top of it, our India and Middle East business is undergoing a fundamental restructuring. Quarter one always has a little bit of holiday in Middle East, with the oil price, where they are even the Middle East. In general, the economy is not helping. Some of that add up to a little bit of growth headwinds that you talked about.

But I feel quite optimistic about the overall demand environment and especially with our strategic focus on mining, so that we are able to drive more revenue from our exiting top clients.

ET Now: But if you are optimistic about the demand environment, why have you given a guidance for the second quarter which is perhaps your weakest in many years?

Abid Ali Z Neemuchwala: These issues are connected to the sectors that I highlighted, as well as some of the strategic restructuring that we are undergoing. Also, what has happened is that Wipro does have a larger than average share of discretionary spend historically.

When there is a level of uncertainty in the market, whether it is due to oil price, whether it is due to Brexit, the discretionary spend is the first one to slowdown. That is where we see probably a larger than normal share of slowness.

ET Now: Are there any issues that you are seeing among top five clients or top two clients?

Abid Ali Z Neemuchwala: The only thing I would say is that the number of energy and utility customers since we have such leadership in that segment, from amongst the top 10 clients, the share of those customers is relatively higher compare to the average in the industry. And hence when you look at some of the relative growth in that segment, you do see a little bit of sluggishness.

ET Now: You have mentioned some one-offs with respect to amortisation wage hike, but even with that this is at least a percentage or two higher than what everyone was estimating. Should we read this as the bottom, as far as margins for you are concerned?

Jatin Dalal: Our endeavour is that we overcome a substantial portion of that through the operational improvement that will drive onsite offshore movement, pyramid correction, hyper-automation, improvement in margins in the acquisitions that we have completed.

So we believe that a substantial portion of that we would try and overcome and there on beyond that we have…

ET Now: Will all this happen by the end of the second quarter, at least some of the initiatives on the operational front?

Jatin Dalal: Except for this 200 bps hit, I do not see on horizon any additional large hit to the margins when I look at the rest of the year.

ET Now: With 79.3, you still have I mean at least two or three per cent to where the rest of people in the industry are. What steps are you going to be taking in that direction?

Saurabh Govil: If you look at the entire supply chain, let me take a step back and takes into utilisation, hiring, attrition and you have to take the entire piece together. Hiring, as we have been saying, it will continue as per plan. But clearly, from an organisation standpoint, huge focus is being driven on re-skilling people.

As in the past we were hiring people, very clearly the focus now is 20,000 to be trained on digital technologies, lot of focus on development of people. That is a huge focus area for us, which will also mean that we will re-train people and move over.

Second, we are seeing is that lot of automation is happening at the bottom of the pyramid for us and that will release people for us to be really for higher value added jobs that is the second thing.

Third is attrition, and we have seen very narrow band of attrition over the last six-seven quarters, only in this quarter we have seen a spike and there are couple of reasons for that. Clearly, when you had very differentiated salary increase, our performance management was there for appraisals, there is a performance cases as well as the traditional quarter where the people go for higher studies.

If we take all this, I think it is only for this quarter and we will see things coming back from attrition perspective coming down in the next quarter. If you put all this together, we clearly see head space for us to improve our utilisation which also will be a very clear margin lever for us as we move forward. And we have seen the movement in this quarter and we clearly see head space for us to do it even better as we move forward.

ET Now: And other thing is, of course, that you have the Viteos acquisition which would have been pretty significant one. Is this just a time line issue or anything else that did not meet your expectations there?

Abid Ali Z Neemuchwala: Yes, I would not read too much into it. It was taking just too long, and that is why we both mutually agreed to drop it.

ET Now: How much of a factor that that play into your forecast or the growth that you are forecasting for the second quarter?

Abid Ali Z Neemuchwala: I would not call it significant, because we always know whether the acquisition is going to happen or not. Last time we had said that our guidance does not include that. So, inorganic is easy to plug in separately.